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Kai Ryssdal: The place to be this weekend — if global economic policy happens to be your thing — is Seoul, South Korea. Finance ministers from the G-20 industrialized countries are meeting about currency values, in part. Treasury Secretary Timothy Geither, as you know, hasn’t had much luck convincing the Chinese to change their approach. So he’s going to try something new in Seoul.
Our Washington bureau chief John Dimsdale has more.
John Dimsdsale: The industrial leaders do agree a trade imbalance exists — some countries export too much, some countries import too much. Secretary Geithner is proposing to set limits on those trade gaps. That means China would have to increase domestic demand for its own products and U.S. imports. How? Raise interest rates on bank deposits is one way, says the American Enterprise Institute’s Claude Barfield.
Claude Barfield: Chinese consumers really get very little or no return, almost a negative return. You could also put a lot of money into the social safety net. You could cut taxes.
But the fastest way would be for China to increase the value of its currency. And Gary Hufbauer at the Peterson Institute for International Economics says Geithner’s using a backdoor to get a result he couldn’t achieve through the front door.
Gary Hufbauer: When we were talking about the currency it was China, China, China. When we’re talking it this way, it’s a little more neutrally phrased in hopes that it doesn’t provoke quite the same level of confrontation and rhetorical sparks.
Except that Geithner’s new strategy also hits other countries with export surpluses, including allies like Germany and Japan. They’re telling the U.S. there’s no way they can change domestic consumer behavior. At least, not quickly, says Dartmouth professor Matthew Slaughter.
Matthew Slaughter: It takes a long time for policies and incentives to be altered for how companies and families operate.
Slaughter expects that if there’s agreement at all among the G-20, it will be a very general set of goals without any enforcement or benchmarks along the way.
In Washington, I’m John Dimsdale for Marketplace.
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